Firm decision to cut its dividends

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In a perfect world capital market, how important is a firm's decision to pay dividends versus repurchase shares? Under what conditions would you have a tax preference for share repurchase rather than dividends? Would managers acting in the interest of long term shareholders be more likely to repurchase shares if they believed the stock to be either undervalued or overvalued? Explain how you would respond to firm's decision to cut its dividends.

Reference no: EM131166123

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